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Late buying sends Dow to another high


NEW YORK -- U.S. stocks, buoyed by a late burst of computer-driven buy orders, closed higher yesterday as optimism about low interest rates offset concern about a possible resurgence of inflation.

The Dow Jones industrial average set its second successive record, climbing 23.25 to finish at an all-time high of 3,523.28. The average soared 55.64 points Wednesday.

Computer-guided buy orders took effect just before the close, adding about 12 points to the Dow industrials, said Philip Smyth, an analyst at Birinyi Associates. Computer buy orders, which have coincided with the close over the past week, "frequently indicate an index fund getting invested because they track the market from close to close," said Mr. Smyth.

Standard & Poor's 500 Index rose 3.02, to 450.59. The Nasdaq Composite Index soared 7.00, to 697.43. The American Stock Exchange Market Value Index jumped 2.37, to a record 432.29, )) passing the old high of 429.92 set yesterday.

Stocks soared as inflation jitters remain subdued. Concern about inflation was rekindled last Thursday, when the government said consumer prices were rising at a faster pace than economists expected, stirring fear that the Federal Open Market Committee might move to raise interest rates this week.

"The stock market had been under pressure because of the inflation numbers and a fear that the Fed would tighten because the Fed has stated its first goal is to fight inflation," said Barry Berman, head trader at Robert W. Baird.

"When they had this meeting and nothing materialized in the way of tightening, people who had gotten out of the market jumped back in, hoping interest rates will stay low and eventually get the economy going."

Advancing issues outnumbered decliners 9-to-6 on the New York Stock Exchange. Trading cooled from yesterday's frenetic pace, but remained active, with more than 289 million shares changing hands on the Big Board.

"As long as rates stay down, where else are you going to put your money?" said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co.

Still, because stocks are being driven by short-term bets by speculators rather then optimism about a sustained economic recovery, prices may tumble on any sign inflation might be heating up, analysts said.

"There's no real underlying conviction about inflation, interest rates,the economy, or earnings," said Michael Metz, chief investment officer at Oppenheimer & Co.

"If we get any sense that rates are going up, we'll get hit big-time," said Ronald Doran, director of institutional trading at C. L. King & Associates.

In addition to low rates, investors also were encouraged yesterday by House Democrats' tentative support for President Clinton's economic package, prospects for cutting the federal budget deficit, and "a sense the Fed is not going to tighten" credit for the time being, Mr. Doran said.

Treasury securities flagged after posting mild gains on news indicating economic activity is slowing. The Federal Reserve Bank of Philadelphia said its May index of general business activity in that region sank to 11.3, from 24.6.

The benchmark 30-year bond shed 5/32, to close at 101 25/32. The yield was 6.98 percent, up 1 basis point from yesterday.

Bond yields remain up almost 15 basis points since last Thursday, when the Labor Department reported consumer prices were rising at an annual rate of 4.3 percent through April, up from 2.9 percent in 1992.

Retail stores, telephone, international oil, and entertainment 1b stocks led the advance in the S&P; 500 industry groups.

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